Consumer Electronics Market in Ireland-Dissertation Writing Help

Introduction

This report analyses the market for Consumer Electronics in Ireland. For the purposes of the study, the market has been divided into two sectors:

· Video products

· Audio products

Irish consumer electronics grew by more than 19% in current value terms over the 1998-2003 review period and by nearly 7% over 2002 to approach a value of €490million in 2003. Recent growth in consumer electronics has been somewhat restricted by the recent downturn in the Irish economy, which has seen the near double-digit economic growth rates of the late 1990s drop to between 2% and 3% towards the end of the review period.

Unit Prices Consistently Fall

Analogue To Digital Switchover

One of the most important issues that will shape the future sales of televisions will be the switchover from analogue to digital TV. Trade associations representing the interests of consumer electronics manufacturers have been putting pressure on the European Commission to enforce a deadline for all EU countries to switch to digital TV transmission – with possible estimated deadlines being put as early as 2007, although 2010 would be a more realistic figure. Indeed, analogue broadcast has already been phased out in Berlin, Germany.

Sony Dominates

Sony is the leading brand within consumer electronics in Ireland, with a share that grew by half a percentage point to surpass 20% in 2003. Sony’s leadership owes as much to the success of its new innovations (such as the Memory Card, which has revolutionised digital camera use), as it does to its strength across the board in virtually all audio and video product categories.

Specialist Multiples Go From Strength To Strength

Specialist multiples, with their mixture of extensive display facilities and competitive prices, have continued to take market share from the specialist independents, and to a slightly lesser extent from department/variety stores. Within specialist multiples, Ireland’s home-grown chains Power City and DID Electrical Write have provided stiff competition for the UK-based Currys and Dixons chains. The “Wal-martisation” effect has also seen supermarkets/hypermarkets in Ireland making inroads into audio and video products.

Consumer Electronics

Market Performance

Ireland’s tiger economy

Up until the latter part of the review period, Ireland had experienced unprecedented economic growth, which had seen the level of Irish real GDP almost double in size to around US$30,000 per year. Although this figure includes the substantial profits made by foreign multinationals, much of which is repatriated, this high GDP has been translated into fast-growing levels of personal disposable income for Irish consumers, which has in turn boosted the demand for consumer electronics. There have been many reasons put forward for Ireland's economic prowess, including EU membership and access to the Single Market, Ireland’s low corporation tax rate and a large multinational presence. The Irish economy has also benefited from its early adoption of the euro, with the increasing strength of the euro against both the US dollar and the pound sterling providing a further boost for the Irish economy.

Downturn in the Irish economy takes its toll

Sales of consumer electronics grew by 19% in current value terms over the review period to reach a value of €488 million in 2003. Growth in consumer electronics has been restricted primarily by the recent downturn in the Irish economy, which has seen the near double-digit economic growth rates of the late 1990s drop to between 2% and 3% towards the end of the review period. Much of the blame for this falling growth rate has been attributed to Ireland’s “overstretching of itself”; the Irish economy is now beginning to pay the price for the rapid development (including a 0% unemployment rate) it experienced during the 1990s. Many of those tempted to return to the so-called Irish tiger economy are now being confronted with overproduction and a 5% unemployment rate.

Unit prices fall

Another significant factor that has affected value growth in consumer electronics in Ireland has been the global trend of price-cutting for consumer electronics goods. As a result, volume growth, at 23%, outstripped value growth over the review period by almost four percentage points. Prime examples of price-cutting include DVD players and digital cameras, both of which saw their average unit price fall by more than 50% over the course of the review period. The only exception to this overall trend in falling prices has been in colour televisions, where the immense attraction of the new widescreen and plasma-screen televisions has prompted some consumers to spend as much on a new television as they might do on a medium-range second-hand car. Given that colour televisions account for the lion’s share of sales in the video sector, the above factor has done much to lessen the effects of falling unit prices in other product areas.

The gateway to the living room – the competition intensifies

Consumer electronics manufacturers have also had to fight hard to win over customers in the face of competition from their two closest rivals, PCs and video games. PC penetration in Ireland has now reached a level of around 60% of all households, according to official sources, and is well positioned to benefit from the spread of broadband technology and falling prices (albeit at a lower rate than for consumer electronics). Meanwhile, with almost a third of the population belonging to the 25- to 44-year-old age group, video games have proved to be an extremely popular purchase among Ireland’s very young population.

Technological advances help consumer electronics weather the storm

In the context of the economic downturn, falling unit prices and stiff competition from PCs and video games, however, the more than 19% review period current value growth in consumer electronics is a very positive indication of the strength of the market. The main driver behind the growth is, without a doubt, technological innovation. The most important development was the replacement of existing formats with digital technology, with DVD recorders replacing conventional VCRs (video cassette recorders), and digital camcorders and still cameras fast replacing their analogue counterparts.

Digital technology benefits from increased penetration of PCs in the home

Although PCs provide stiff competition for sales of consumer electronics, they have also played an extremely important role in the increasing popularity of digital technology. The use of software packages (such as Adobe Photoshop) can turn a PC into a full-blown editing suite, thereby allowing the owner of a digital still camera to give their holiday snaps or bits of film a professional look.

Ireland’s upwardly mobile quick to embrace new technology

This idea of empowering the user to create his or her own bits of film or music has opened up consumer electronics to the young, sophisticated, middle classes that have benefited the most from the boom in the Irish economy. Five years ago, this high-earning group of people would have shown little interest in say, video cameras, considering them to be an expensive gimmick that is both too bulky to carry around and, above all, which produces distinctly unrewarding results in terms of image quality. However, the fact that PCs can now be used in a highly creative way to alter the images and sounds produced by camcorders etc has finally brought this group of consumers in from the cold.

Manufacturers target “creative wannabes” in marketing campaigns

Consumer electronics manufacturers have been quick to target young, affluent consumers as part of their marketing campaigns. Sony’s series of adverts for its range of camcorders features young, good-looking creative types who have “just made their first short film” etc. Another example is Philips’ “let’s make things better” series of adverts. Focussing on the interactive nature of the new digital technology has proved to be a strong draw for creative “wannabes” who are generally too young to have families of their own and, thus have the necessary personal disposable income at their disposal to contemplate such a purchase.

Sony the leading player

Sony Ireland Ltd is the number one player in Irish consumer electronics with a market share that grew by half of one percentage point to reach over 20% of volume sales in 2003. Sony’s leadership owes as much to the success of its new innovations (such as the Memory Card which has revolutionised digital camera use), as it does to its strength across the board in virtually all audio and video products categories. In terms of Sony’s performance, a judicious programme of restructuring activities saw Sony’s pre-tax profits increase by more than 1% in 2003. The most important of these restructuring activities to affect the consumer electronics industry was the merging of Aiwa Electronics into the Sony Corporation late in 2002. Aiwa, added another 5.8% of Irish consumer electronics volumes to Sony Corp’s overall hold on the Irish marketplace.

Second-placed Panasonic, owned by the Matsushita Electric Industrial Co Ltd, held a market share less than half the size of Sony’s, at slightly over 8%. The large gap between Sony and its nearest rivals is largely due to specialisation in certain sectors. It is within this group of “second division” players – ie Panasonic, Philips and JVC, where competition is the most intense. Further down the ladder, consumer electronics has become flooded with cheap brands from the Far East, many of which have become the cheap private labels now on sale in the specialist multiples, such as Power City, Dixons and Currys.

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Sunday, 11 May 2014

Consumer Electronics Market in Ireland